Chinese robotics makers feast on government subsidiesSeptember 2, 2016
Local governments heeding Beijing’s call to develop the sector provide millions of dollars in grants for companies eager to fatten their bottom lines
By Li Liuxi and Chen Na
(Beijing) – Local governments pumped hundreds of millions of yuan into the robotics industry in the first half of the year, helping to boost profits by as much as 60 percent in those companies rushing to take advantage of the generosity.
With strong support from Beijing, China has embarked on a robot-building frenzy in the last two years in an effort to move beyond traditional manufacturing. But as often happens in industries targeted for development, poorly designed incentive programs often lead to abuse that results in millions of dollars in wasted funds.
Similar waste in China’s electric-vehicle and renewable-energy sectors has led to the buildup of huge new capacity that is sometimes unusable or of such low quality that no market exists for the products.
In the case of robotics makers, Caixin found government funding made up a large portion of profits for a dozen manufactures listed in Shanghai, Shenzhen and Beijing in the first six months of this year.
Guangdong-based Greatoo Intelligent Equipment Inc. earned 19 million yuan (US$ 2.84 million) in the first six months of this year, more than 60 percent of which came from the local government, according to the company’s financial report. In March alone, Greatoo’s two robotics projects received subsidies of 8.7 million yuan from two government departments.
Subsidies also contributed 40 to 60 percent of profits for three companies — Topstar Technologies Ltd., Guangdong Bo Lante Intelligent Equipment Co. Ltd., and Jiangsu Yawei Machine Tool Co. Ltd. Another four saw government awards make up 10 to 30 percent to their income. Siasun Robot & Automation Co. Ltd., the country’s biggest maker of industrial robots in the northeastern city of Shenyang, received 34 million yuan from its local government, about one-fifth of its profit.
In a letter to a robotics conference late last year, President Xi Jinping expressed his support for the industry. Premier Li Keqiang also sent a letter to the conference, writing that the robotics industry will be a key to innovation-driven development.
Earlier this year, Chinese appliance maker Midea announced plans to buy German robotics giant Kuka AG in a 4.5 billion euro (US$ 5.02 billion) takeover bid, one of the biggest such deals in Europe by a Chinese firm.
The world’s second-largest economy still has lower robot penetration than other major countries — just 36 per 10,000 manufacturing workers last year. That ranked China 28th among the world’s most automated nations, according to the International Federation of Robotics. Beijing aims to boost penetration to 150 per 10,000 workers in the next five years, IFR said, citing Wang Ruixiang, president of the China Machinery Industry Federation.
However, most Chinese robotics companies can only make low-end products and still rely heavily on government subsidies, according to CCID Consulting, a research group affiliated with the Ministry of Industry and Information Technology. Manufacturing of more advanced robots that can be used in welding and car making are still dominated by European, U.S. and Japanese companies.
Contact reporter Chen Na (email@example.com); editor Doug Young (firstname.lastname@example.org)